Federal Reserve Bank of Boston President Susan Collins stated that the current rate policy is well positioned and maintaining the current rates seems most appropriate. She indicated that tariffs may lead to increased inflation and slower growth, potentially pushing core inflation above 3% this year.
Collins mentioned that renewed price pressures could result in delayed rate cuts, while the Federal Reserve might still find opportunities to lower rates this year. She noted the complexity of Fed policy choices, which are affected by trade-offs and the need for nimbleness in a fluctuating economic environment.
Keeping Inflation Expectations Stable
Collins emphasised the importance of keeping inflation expectations stable, acknowledging both upside inflation risks and downside growth risks. The Fed’s current policy is still aimed at reducing inflation pressures despite tighter financial conditions possibly constraining activity. She anticipates a decline in inflation pressures over the long term, amidst high uncertainty affecting the economic outlook.
In this latest commentary, Collins is effectively reaffirming that policy rates are likely to remain elevated for longer than some may have expected. Her comments imply a watchful stance—where adjustments will be made only if warranted by hard data rather than projections. There’s also a clear message: while rate reductions are not ruled out, they will not happen hastily. Inflation, particularly core measures, continues to loom large, and fresh cost pressures from tariffs would not help an already delicate balance.
It’s worth noting that she framed the situation as a tightrope walk between containing inflation and not pushing the economy into a weaker growth cycle. Collins did not express overconfidence—quite the reverse. Her tone carries a caution that reminds us of the consequences of reacting too quickly.
Conservative Forward Pricing
There’s no ambiguity in what this implies for us operating in rate-sensitive markets. Forward pricing should remain conservative, avoiding aggressive positioning on early cuts. The suggestion that core inflation might breach 3 per cent again this year doesn’t just indicate a bump—it increases the probability that easing could be deferred until clear signs of retreat emerge.
We have already seen a shift away from bets on a mid-year pivot, and remarks like these provide justification. The longer rates stay high, the more existing positions become expensive to hold. The question now becomes one of resilience—who can tolerate the carry while waiting for confirmation of a directional move?
The mention of nimbleness should be taken seriously. It hints at responsiveness without commitment, meaning every fresh data release now carries heavier weight. There is no direct path forward, only conditional steps.
We’ve started adjusting short-term strategies to reflect this. For example, reducing exposure to instruments reliant on early policy moderation, while scaling into products that benefit from rate stasis and mild yield curve steepening. Not dramatic shifts, but considered ones with definable downside.
Moreover, her reference to uncertainty is practical, not abstract. It acknowledges volatile inputs—from supply chains to geopolitical moves—and encourages a mode of analysis that reacts to changes rather than presumes them. We should do the same.
Keeping a close lens on inflation-linked metrics and not discounting forward guidance when it begins to shift—those steps become even more important now. Until cost pressures visibly ease or spending data softens materially, the incentive for the committee to ease remains weak. What Collins has effectively done is narrow the timeline in which reactionary cuts look likely.
It’s her way of reminding us that even when growth cools, the threshold for action remains relatively high. Patience on our part, then, is as vital as precision. Strategy lies in staying adaptable, weighted toward probability rather than wishful possibility.
